Will CLAW Be the Waterloo for Anti-Syndication Forces?

[This post was written to be posted almost a month ago, when the Errol Samuelson news broke, wiping the media calendar clean. And then I went on the road. Nonetheless, the issues raised here and the access to Zillow and to Annie Ives are important enough and I think still relevant, so I figured I’d post it. Even if a bit later than I had hoped.]

The CLAW/TheMLS 48-hour delay saga enters a new chapter, as I have some new data and some new information in my possession. For those not familiar with what’s going on, this Inman story by Andrea Brambila is an excellent place to start. And of course, I’ve already written about the tension between CLAW and CRMLS.

I have been working on trying to get a bit more information on some facts surrounding the brouhaha, and I managed to get a senior Zillow executive on the phone to get their side of the story. What I’ve learned makes me re-evaluate l’affaire de CLAW in a new light. This might be a seminal event in the evolution of real estate, a Waterloo for the anti-syndication forces within the MLS industry.

What I’ve Learned

According to my source at Zillow, the reality of what happened and what is happening is as follows:

CLAW made its decision to delay the feed by 48 hours.

Zillow decided not to accept a delayed feed from CLAW via ListHub, because it regarded the delay as intentionally introducing inaccuracy into the data. My source told me that Zillow’s management felt turning off the data completely was one thing, but intentionally making data less timely was completely unacceptable. They would rather give up some coverage than to make such a compromise.

As a result, Zillow emailed all of the brokers and agents from CLAW it had within its system notifying them that their listings would be taken off of Zillow. According to the senior Zillow executive, at no point did Zillow “tell brokers what Association to join” or encourage anyone to leave CLAW. He said that arose from customer service responses to brokers who had contacted Zillow to ask how they could get their listings back on Zillow; Zillow told them that if they were members of CRMLS — because a number of CLAW brokers are members of both MLSs — their listings would reach Zillow through CRMLS.

Almost immediately after sending out that email notification to CLAW’s brokers, Zillow received an angry phone call from CLAW demanding to know what Zillow did. Apparently, according to the Zillow senior executive, CLAW was so besieged with angry phone calls from its brokers and agent subscribers that CLAW took its phone system offline for several hours.

CLAW is in full-retreat mode from its decision, and CLAW tech support representatives are literally referring brokers who want to opt out of the delay directly to Zillow to setup direct feeds.

As of Monday, March 3rd, Zillow has 93% of the listings in CLAW in its system without the delay through a combination of direct feeds from franchises and brokerages, and brokers who have opted out of the 48 delay program. I asked what percentage of CLAW’s brokers that 93% represented, but my source didn’t know. He did, however, expect that percentage to go up over the next couple of weeks as Zillow was still processing direct feed requests from CLAW participants.

One interesting side note here is that a “direct feed” isn’t necessarily the brokerage company sending a CSV file along. In many cases, a brokerage “going direct” hires a vendor — such as Real Estate Digital — who uses the broker’s own credentials to pull listings from the MLS, aggregates them, and sends the package to Zillow.

CLAW Responds

Given the information I got from Zillow, I contacted CLAW to get their side of the story. I spoke with Annie Ives, the CEO of CLAW/TheMLS, and here are her responses:

On the 93% number, she didn’t know specifically, but she did say that Coldwell Banker, RE/MAX, Keller Williams, and the larger brokerages all had direct feeds in place with Zillow.

Regarding solicitation, Annie Ives emphatically states that Zillow did solicit agents and brokers to switch Associations and MLSs. She says that Zillow was calling individual agents, urging them to switch, and following that up with calling brokers urging them to switch or to setup direct feeds. CLAW hasn’t lost a single member over the 48-hour issue; in fact, it’s growing membership.

Regarding the allegation about complaint calls, Annie Ives emphatically denied receiving such calls. In fact, most of the customer service calls CLAW received was not about CLAW, but about Zillow. Direct quote: “Complaints we got were about Zillow harassing our agents and brokers, not about CLAW.” She actually laughed when I relayed in the information about having to shut off their phone system. No such thing happened, according to Ives, and she said, “Our phone system is just fine. That’s ridiculous.”

She said that her members are totally in support of the 48-hour delay decision. She called some brokers to ask them, and they were in support of the decision. She called some agents, including a top producer named Frank. Frank told her that he didn’t care about having his listings on Zillow, and that he supported the decision.

On a recent webinar with 240 attendees, part of the conversation was about the 48-hour delay. All 240 participants were in support of the decision.

She mentioned that the original decision by the Board was unanimous. The Board only reached that decision after months of study and due diligence, knowing it was a controversial one.

Regarding the referrals to Zillow, Annie Ives said that Zillow reached out to her wanting to get past the conflict, to have a good relationship with CLAW, and to cooperate. So CLAW treats Zillow exactly the same as it treats Trulia or REALTOR.com. When a broker wants to setup a direct feed, CLAW sends a list of those brokers to ZT&R. There’s no special treatment, and certainly no direct “referrals” to Zillow by CLAW support staff.

I report, you decide.

Brokerages Vote With Their Data

As longtime readers know, I have long felt that the syndication kerfuffle is a dead issue. I wrote this in 2012 after Howard Hanna, one of the largest brokerages in the U.S., entered into a deal with Zillow:

So that announcement by Howard Hanna, together with Zillow’s quarterly report, delineates the next battle line: the big dogs vs. the little independents. Portals would gladly give up advertising revenues, if they can offset it with subscription revenues (well, at least Zillow will). The big dogs would gladly do strategic partnership deals with the portals if those deals give them an advantage in recruiting and retaining agents — especially the strong listing agents.

Note that Howard Hanna did this deal, while being advised by one of the principal opponents of syndication in our industry, the WAV Group. (Marilyn Wilson, one of the partners of the WAV Group, recently gave a presentation to Wilmington Regional Association of REALTORS, that lays out the basics of WAV Group’s stance on syndication.) I asked Victor Lund about that back when the deal happened, and his response was that in a consulting capacity, they advise the client to do what is in the client’s best interest, even if they’re opposed to it from an industry-wide perspective. In other words, even if syndication is “bad”, the most prominent thought leaders of the anti-syndication movement recognize that it is to a broker’s advantage to do syndication deals.

No wonder Zillow’s at 93% of listings. And counting.

Waterloo

In strategic use of power, saber rattling is effective only insofar as other people believe that there is in fact a saber in there. In CLAW’s case, they decided to take action and pulled the saber… only to find out that in fact, what they have is a butter knife. And now everyone, from Zillow to Trulia to every mom-n-pop brokerage out there knows that CLAW cannot backup its words with action.

93% of the listings on CLAW are on Zillow without a delay. 93%!

Leaving everything else aside, just think about that number. Given my experience in the MLS industry, and the peculiarities of “opt-in” vs. “opt-out” mechanisms (i.e., so few brokerages even pay attention to most MLS rules/functions that an “opt-in” program gets very, very few participants, while hardly any broker every “opts-out” of a program), I thought perhaps Zillow might have 30% of the CLAW listings through direct feeds and opt-out. I was wrong. In fact, I was flabbergasted that the number Zillow posted was 93%.

Like most MLSs, I am certain that CLAW and its Board believed that once they make a decision, the subscribers/participants will follow along. Sure, there might be a complaint here, a grumble there, but they would get compliance. In fact, Compliance is a core function of the MLS; the MLS folks are so used to having brokers and agents comply with rules and regulations that the thought of widespread non-compliance likely didn’t even occur to CLAW’s decision makers.

Instead, with this issue, it turns out that noncompliance isn’t just widespread. It’s not even a supermajority. Virtually every single member of CLAW is in noncompliance. 93%! And growing!

The bottom line is, CLAW decided to go to war against Zillow and Trulia. The result is nothing short of total defeat. And the defeat was so decisive — 93%! — that it will influence the strategic thinking of all of the involved parties. This was Waterloo.

Larger Impact

There are at least three big picture consequences of CLAW’s Waterloo moment:

The balance of power between the MLS and the portals has hit a tipping point.

There are real anti-trust implications to anti-syndication.

Syndication may now be required practice for real estate.

I know many of you think all of these are insane, so let me lay out the case.

Balance of Power

One of the most important lessons I learned about the power of the Internet, and specifically the real estate portals, came almost ten years ago when I was still at Coldwell Banker Commercial (then Cendant, now Realogy).

We were in negotiations with CoStar over a seven-figure company-wide site license renewal. It was a tough negotiation, and we were approaching the termination date. We had been assured that CoStar would extend the contract end date so we can iron out a couple of details that remained. However, CoStar sent an email to every single CBC agent who was using the CoStar system that their access would be terminated on Monday, as we had not renewed the corporate contract. That email went out late Friday afternoon, towards close of business. By Saturday morning, those of us working at CBC got word from on high that if CoStar cut off our people on Monday, none of us needed to report to work.

It appears that a number of agents — particularly the high-production agents who were frequent power users of CoStar — immediately notified their broker that if CoStar gets cut off, they would march across the street to a competitor. Those brokers, our franchisees, immediately called not just our President, but Alex Perriello, the big boss of all franchise operations, and informed us that if that happens, and they lose their top agents, they would be leaving the franchise immediately.

Obviously, we caved on every single term in the negotiation and averted the Monday cutoff.

That experience told me that to these agents, CoStar was more important and more valuable than their brokerage (with whom some had spent their entire careers), their franchise, the brand on their business card (that we insisted was such a valuable asset that they should pay 6% of their GCI as royalties), and the various tools and resources we had worked so hard to provide to them. We could talk discounts on cellphone bills till we were blue in the face. We could market the living hell out of our awesome intranet. Did not matter. CoStar was more important than all of us combined.

The CLAW event, to me, is the same thing happening but between the MLS and the brokerage. Brokers, particularly the largest brokers, might rant and rave about Zillow, argue strenuously against syndication, and earnestly insist that the MLS is the best thing since sliced bread. But when push comes to shove, they syndicate to Zillow. Why? Because their agents, especially their most productive listing agents, value Zillow for the marketing exposure it provides to consumers. Once again, 93%, y’all. Not 33%, not 63%, but 93%.

The balance of power between the MLS and the portals has shifted. We’ll see what the experiences of other MLSs are with this — Austin’s ACTRIS is set to cutoff ListHub and syndication soon. But that’s what I see.

Anti-Trust Implications

That 93% figure is also significant because it implies that every single large brokerage and national franchise has a direct feed to Zillow in place already. The majority of the Board members at CLAW belong to such large brokerages and franchise companies, which means that their decision to delay the feed would not affect them or their companies.

Who does it affect?

The small independents. The mom-n-pop brokerage. The buyer specialists and buyer-brokerages who spend money advertising on Zillow for buyer leads.

The debate over syndication is usually framed as “industry” vs. portals, or brokerages vs. big tech companies. But as I’ve pointed out before, the portals can’t stay in business without agents and brokers willing to pay them. The reality is that the syndication fight is actually a fight between brokerages: those who feel they don’t need Zillow, except to appease their listing agents, and those who do. That’s usually a Big vs. Small divide.

Right after the CLAW decision in the news, I spoke with the office manager of a small boutique brokerage in the LA area, who asked for anonymity for obvious reasons. She thought the decision was, in her words, “total bullshit” and she viewed it as the big brokerages who control the CLAW board (her words, not mine) trying to make it harder for small boutiques like hers to compete. She mentioned that her small company doesn’t have a Chief Technology Officer, doesn’t have a large technology budget, and relies on the MLS to get their listings to the portals, unlike the big brokerages. Yes, she was fairly upset about the decision.

That’s anti-trust, y’all. There’s really no other way to describe such a thing: a cadre of big brokerages colluding through the MLS, which they control, to create competitive disadvantage for smaller brokerages.

Syndication May Be Required Practice Going Forward

The most significant, I think, is that 93% number.

A while back, I wrote a fun post copying Sam DeBord’s Inman article on liability from pocket listings. Sam DeBord’s original article was pointing out that refusing to put listings on the MLS might open the broker/agent to liability since “Limiting [a property’s] exposure puts an agent’s personal financial gain at odds with a client’s financial return.”

What I wrote then:

If you’re afraid of liability from pocket listings, then you ought to be afraid of liability from refusing to syndicate listings. Since the same statistical tools that purport to show harm to consumers from pocket listings could show harm to consumers from not sending listings to the portals.

…

Fact is, most marketing practices likely fall under the business judgment rule of the agent. If an agent is not legally required to do EVERYTHING POSSIBLE to market a home, like hiring clowns at a fair or doing TV ads, then the agent is probably not going to be legally required to put listings on a portal… or in the MLS.

If the reverse is true, and failing to put a listing into the MLS results in liability, then in 2014, I rather think there’s gonna be liability for failing to put a listing on Zillow.

Thing is, the agent is not legally required to do everything possible to market a home. You don’t have to hire singing telegrams or airplanes carrying signs over football games. However, if there is ever a lawsuit, the likely standard that a court would look at is industry norms.

Since nearly everyone in the industry puts listings on the MLS, consistently failing to do so would violate industry norms and widely accepted trade practices. That’s the core of the “pocket listings liability” analysis.

Well, at 93%, it is now safe to say that syndicating listings to portals is an industry norm. Sending listings to Zillow is no longer the equivalent of hiring street performers to promote 123 Main Street. It is not an exotic practice limited to only the techiest of the techie brokers. It is now the equivalent of putting it in the MLS.

If you’re not going to syndicate, I think the reasons have to be similar to not putting the property in the MLS: it’s a luxury property, the client desire privacy, etc. etc. The old argument of, “Well, it’s still available on the Internet on brokerage websites and MLS public facing websites” sounds weak when 93% of the brokerages are doing it, and you’re in the 7%.

Conclusion?

/mount soapbox

I know there are some who take the “us vs them” mentality on this issue and will think that I’m secretly on Zillow’s payroll or some such. Well, whatever. As Ron White once said, ya can’t fix stupid.

Since I do not hold to the us-vs-them mentality, but rather a how about everybody focus on what they do best mentality, I regard the entire syndication kerfuffle as counterproductive. What I fear most is the destruction of the MLS, which is a marvel of cooperative competition. Compliance to MLS rules and policies protects that cooperative competition.

I’ll go on record as opposing anything that undermines the authority of the MLS, that undermines compliance. But that sword swings both ways. If the MLS creates policies that 93% of its brokers ignore or get around… it cannot help but undermine its persuasive authority. I’ll echo Henry David Thoreau who wrote that the best government is that which governs least.

The best MLS is the one that does the least, so that when it does do something, does pass policy, does make rules, those carry enormous weight. Focus on what you do best, and everything else will work itself out.

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.